Poultry News

Historic Chinese Poultry Supply Downturn to Strengthen World Markets

15 September 2016

GLOBAL - The global poultry industry is on the road to recovery following recent supply reductions in the US and Brazil, expected lower feed prices and, most importantly, because of the historic market downturn in the Chinese poultry industry, according to Rabobank’s Global Poultry Quarterly for Q3 2016.

China’s production is expected to be down by 5 per cent this year, and by 10 per cent to 15 per cent next year, positively affecting global market conditions.

“This brings a welcome improvement in global conditions after a relatively weak first half of the year,” according to Animal Protein Senior Analyst Nan-Dirk Mulder.

“Market conditions will be more bullish in the coming months - especially in China, Brazil, the US and India - while the EU and Indonesia will maintain their relatively good performance. Russia’s market conditions are gradually improving thanks to limited supply growth, better economic conditions and fast-growing exports.”

There has been a big market change from the first months of this year, when global markets were flooded by supply as a result of the avian influenza outbreaks in 2015.

Brazil has gained significant market share in global trade, as it took over some of the US markets that were (partly) blocked due to regional and national restrictions. The return of the US in global trade during the last months has led to a very competitive global market environment, with falling prices and a lack of profitability.

Companies from Brazil faced an extra challenge because of a weak domestic market - due to the economic situation with increasing feed prices. This really squeezed margins.

US companies have been challenged by increasing supply from other meat proteins, which makes the US market more competitive.

The industries in both regions have made wise decisions to reduce supply growth through lower placements - and this is already paying off, with better prices in domestic and international markets. As these countries are the world’s leading chicken exporters, it also helps international market conditions, where prices in the second half of 2016 are expected to rise gradually.